Gold's next rally might depend on the stock market and how fast it can deflate as the Federal Reserve tightens its monetary policy, said Bloomberg Intelligence.
"A top potential force for the Federal Reserve to lighten up on tightening -- which is gold resistance -- is a deflating stock market," he said."An elongated period of gold underperformance and stock market outperformance may be reversing. This narrative from 2000 is gaining traction in 2022. The metal is down about 6% vs. about a 15% decline for the S&P 500 to Sept. 9."
The gold- to-S&P 500 ratio bottoming could be the trigger gold needs."The Fed started easing in 2001 as equities deflated and helped to buoy gold. We see parallels brewing in 2022," McGlone pointed out. "The tendency for the Fed to hike rates until something breaks may be nearing an inflection point in currencies, with implications for gold. That the dollar price of the metal on a year-over-year basis to Sept. 9 is down about 5% vs. up 24%, and 12% in yen and euro terms, may be indicative of global economic stress as growth tilts negative and most countries battle inflation," McGlone highlighted.